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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended December 31, 2004

OR

For the Transition period from                    to                    

Commission File No. 0-14354

(Exact name of registrant as specified in its charter)

Indiana

(State of Incorporation)

35-1692825

(IRS Employer Identification No.)

135 N. Pennsylvania St.

Indianapolis, Indiana

(Address of principal executive offices)

46204

(Zip Code)

Registrant’s telephone number, including area code:

(317) 269-1200

Securities Registered Pursuant to Section 12(b) of the Act:

NONE

Securities Registered Pursuant to Section 12(g) of the Act:

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  x

Indicate by check mark whether the registrant is an accelerated filer (as defined by Rule 12b-2 of the Securities Exchange Act).    Yes  x    No  ¨

State the aggregate market value of the common stock held by non-affiliates of the registrant: $247.4 million as of June 30, 2004.

On February 15, 2005, the registrant had 14,038,031 shares of common stock outstanding, $0.01 par value.

Documents Incorporated by Reference: Portions of the definitive proxy statement for the 2005 Annual Meeting of Shareholders (Part III).

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FIRST INDIANA CORPORATION

Form 10-K

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FINANCIAL REVIEW

This Annual Report on Form 10-K contains forward-looking statements that are based on management’s current expectations, but actual results may differ materially due to various factors. Forward-looking statements by their nature are subject to assumptions, risks, and uncertainties. Actual results could differ materially from those contained in or implied by such forward-looking statements for a variety of factors including: changes in interest rates; failure of the Indiana and/or national economies to continue to improve, which could materially impact credit quality and the ability to generate acceptable loans; failure to attract and retain a sufficient amount of deposits and/or failure to receive a sufficient amount of Federal Home Loan Bank advances, which could adversely impact the ability to meet customer and regulatory demands for liquidity; failure to achieve sufficient net income, which could adversely impact the ability to declare and/or pay dividends; declines or disruptions in the stock or bond markets; delay in or inability to execute strategic initiatives designed to grow revenues and/or reduce expenses; inaccurate or erroneous assumptions made in connection with various modeling techniques, which could adversely impact pricing on deposits and loans and the ability to generate adequate net interest margins; the retention of key employees and customers; new legal obligations or restrictions; and changes in accounting, tax, or regulatory practices or requirements. For additional information about the factors that affect First Indiana’s business, please see the periodic filings with the Securities and Exchange Commission. The fact that there are various risks and uncertainties should be considered in evaluating forward-looking statements, and undue reliance should not be placed on such statements. First Indiana undertakes no duty to update forward-looking statements.

FIVE-YEAR SUMMARY OF SELECTED FINANCIAL DATA

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OVERVIEW

First Indiana Corporation (“First Indiana” or the “Corporation”) is the holding company for First Indiana Bank, N.A. (the “Bank”), the largest commercial bank headquartered in Indianapolis. First Indiana Bank is a community bank offering a full range of banking services in central Indiana. The Bank attracts deposits and originates commercial and consumer loans and offers cash management and trust / investment advisory services through 31 banking centers. Additionally, the Bank originates home equity loans on a national basis through a network of agents and brokers. These loans are primarily sold to investors.

In October 2004, First Indiana sold substantially all the assets of Somerset Financial Services, LLC (“Somerset Financial”), an accounting and consulting firm. Somerset Financial’s results of operations are reported as discontinued operations, and the results of operations and cash flows have been removed from the Corporation’s results of continuing operations for all periods presented in the Consolidated Statements of Earnings, Consolidated Statements of Cash Flows and Notes to Consolidated Financial Statements. Likewise, the assets and liabilities of Somerset Financial have been reclassified to assets and liabilities of discontinued operations on the Consolidated Balance Sheets.

The Corporation’s success is largely dependent on its ability to manage credit risk and interest rate risk. Making loans is an essential element of the Bank’s business, and there is a risk that loans will not be repaid. The risk of loss on a loan is affected by a number of factors, including credit risks of a particular borrower; changes in economic or industry conditions; the duration of the loan; and, in the case of a collateralized loan, uncertainties about the future value of the collateral. An economic downturn could contribute to deterioration in the quality of the loan portfolio. Loans made up 79 percent of the Corporation’s assets at year-end 2004. If an economic downturn occurs in the economy as a whole, or in Indiana where First Indiana has approximately 61 percent of its loans, borrowers may be unable to repay their loans as scheduled and the value of real estate or other collateral that may secure the loans could be adversely affected.

Interest rate risk is defined as the exposure of net interest income, net earnings, and equity to changes in interest rates. First Indiana manages risk from changes in market interest rates, in part, by controlling the mix of interest rate-sensitive assets and interest rate-sensitive liabilities. Because the Corporation is currently in an asset-sensitive position (where assets reprice faster than liabilities), recent rate increases by the Federal Reserve Board have begun to be reflected in an improving net interest margin.

Net interest income is income that remains after deducting the interest expense attributable to the funds required to support total assets from total interest income generated by earning assets. Income from earning assets includes income from loans, investment securities, and short-term investments. The amount of interest income is dependent on many factors, including the volume of earning assets, the general level of interest rates, and yields on a variety of earning assets, from investments to loans. The cost of funds varies with the amount of funds necessary to support total assets, the rates paid to attract and hold deposits, the rates paid on borrowed funds, and the levels of interest-free funds.

In 2004, the Corporation focused on improving credit quality, reducing costs and repositioning the balance sheet, positioning the company for expansion in 2005 and beyond. In the area of credit quality, non-performing assets at December 31, 2004 and net loan charge-offs in 2004 were down from comparable measures in 2003. The cost reduction plan announced in the third quarter of 2004 is expected to result in improved pre-tax earnings of approximately $4,000,000 annually. In October, the Corporation sold the assets of Somerset Financial Services, LLC and in November completed the sale of the non-Indiana construction loan offices. In December, the Corporation completed a tender offer and repurchased approximately 11 percent of its outstanding shares. Potential opportunities for revenue growth in 2005 include interest rate increases, increased asset demand by purchasers of consumer finance bank loans, and increased commercial loan and deposit demand resulting from a recovery in the economy. The risks and challenges that management sees to improved profitability in 2005 include attracting loans in the Bank’s marketplace; managing credit risk; yield compression as competition for loan growth intensifies; price and sales competition for deposits; controlling non-interest expense; and profitably deploying the Bank’s resources.

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CRITICAL ACCOUNTING POLICIES

The accounting and reporting policies of the Corporation and its subsidiaries conform to accounting principles generally accepted in the United States of America and general practices within the financial services industry. A summary of the Corporation’s significant accounting policies is contained in Note 1 of the Notes to Consolidated Financial Statements. In fulfilling its responsibilities, the Audit Committee of the Board of Directors has reviewed the accounting and reporting policies of the Corporation. In preparing the Consolidated Financial Statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the balance sheet and revenues and expenses for the period. Actual results could differ significantly from those estimates. Material estimates that are particularly susceptible to significant change in the near term relate to the determination of the allowance for loan losses, assumptions used to value loan servicing rights, goodwill, and the determination of the valuation allowance for deferred taxes.

Allowance for Loan Losses

The allowance for loan losses is maintained at the level deemed adequate to cover losses inherent in the loan portfolio. The allowance for loan losses is increased by the provision for loan losses charged to expense and reduced by loans charged off, net of recoveries. The determination of the adequacy of the allowance for loan losses is based on projections and estimates concerning portfolio trends and credit losses, national and local economic trends, portfolio management, the assessment of credit risk of performing and non-performing loans, and qualitative management factors. While management uses available information to recognize losses on loans, future additions to the allowance for loan losses may be necessary based on changes to one or more of the above-noted risk factors. In addition, various regulatory agencies, as an integral part of their examination process, periodically review this allowance and may require the Corporation to recognize additions to the allowance based on their judgment about information available to them at the time of their examination. The allowance for loan losses is included in the community bank segment.

Loan Servicing Rights

As of December 31, 2004, First Indiana serviced for others a $320,994,000 portfolio of consumer and mortgage loans and has capitalized the associated servicing rights on the majority of these loans. Loan servicing rights represent the present value of the estimated future servicing fees to be collected from the loans serviced for others. The Corporation accounts for loan servicing rights under the provisions of Financial Accounting Standards Board (“FASB”) Statement No. 140, “Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities.” Consumer loan servicing rights are stratified based on lien position and year of origination. Mortgage loan servicing rights are stratified based on loan type (fixed or adjustable rate), investor type (FHLMC, GNMA, private), term, and note rate. Fair values for individual strata are based on the present value of estimated future cash flows using a discount rate commensurate with the risks involved. Estimates of fair value include assumptions about prepayment rates, servicing cost, ancillary servicing income, conversion costs, float and escrow earnings, delinquency rates, and other factors, which are subject to change over time. Changes in these underlying assumptions could cause the estimated fair value of loan servicing rights, and the related valuation allowance, to change significantly in the future. The most significant assumptions in the determination of fair value are prepayment speeds and the discount rate. The value of loan servicing rights is significantly affected by interest rates available in the market which influence loan prepayment speeds. Generally, during periods of declining interest rates, the value of loan servicing rights declines due to increasing prepayments attributable to increased refinance activity. Conversely, during periods of rising interest rates, the value of loan servicing rights generally increases due to lower prepayments. All loans have been sold servicing released since the second quarter of 2004 and the Bank expects to continue this practice resulting in a declining servicing rights asset. Capitalized loan servicing rights are included in the consumer finance bank segment.

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Goodwill

The Corporation accounts for goodwill under the provisions of FASB Statement No. 142, “Goodwill and Other Intangible Assets,” which requires that goodwill and other intangible assets with indefinite useful lives be tested for impairment at least annually. Assets and liabilities, including goodwill, are assigned to reporting units. Reporting units with assigned goodwill are corporate banking and retail banking. Goodwill formerly assigned to Somerset Financial was reclassified to Assets of Discontinued Operations and later included as part of the October 2004 asset sale. Impairment tests indicated that the fair value of each reporting unit with assigned goodwill exceeded its recorded investment (thus goodwill was not impaired). Risk factors considered in determining reporting unit fair value include future loan and deposit originations (and related revenues generated from this activity), future fee revenues and costs associated with the services provided by each reporting unit, and the continued commitment of Corporation resources to each reporting unit. Future tests for impairment will also use this method. Should any of these risk factors change, the fair value of a reporting unit could deteriorate, resulting in goodwill impairment. Goodwill is included in the community bank segment.

Valuation Allowance for Deferred Taxes

The Corporation accounts for deferred income taxes in accordance with FASB Statement No. 109, “Accounting for Income Taxes.” Deferred income tax assets and liabilities result from temporary differences in the recognition of income and expense for income tax and financial reporting purposes. In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities, projected future taxable income, and tax planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that the Corporation will realize the benefits of these deductible differences. The amount of the deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income are reduced.

STATEMENT OF EARNINGS ANALYSIS

Earnings Summary

First Indiana reported net income of $14,678,000, or $0.93 per diluted share, in 2004, compared with earnings of $2,529,000, or $0.16 per diluted share, in 2003. Net income in 2002 was $21,180,000, or $1.34 per diluted share. Earnings in 2004 improved over earnings for 2003 largely due to a decrease of $27,424,000 in the provision for loan losses. Credit quality improved in 2004 with non-performing assets decreasing to $21,445,000 at December 31, 2004, from $38,882,000 at December 31, 2003, and $51,756,000 at December 31, 2002. Net charge-offs of loans totaled $11,575,000 in 2004, compared to $31,513,000 in 2003 and $13,422,000 in 2002. Earnings in 2003 were affected by an increase of $18,218,000 in the provision for loan losses over 2002. The increase in the provision for loan losses in 2003 reflects an increased level of charge-offs, results from the findings of an independent evaluation of the commercial loan portfolio, the continued evaluation of risks in the portfolio at that time, and the Bank’s revised approach for calculating the allowance for loan losses. Earnings in 2002 were affected by an increase of $5,528,000 in the provision for loan losses over 2001 due to increased levels of non-performing loans and charge-offs and the uncertainty of the economic environment in Indiana.

In October 2004, First Indiana sold substantially all the assets of Somerset Financial. Somerset Financial’s results of operations are reported as discontinued operations. Earnings from continuing operations, net of taxes, were $17,183,000, or $1.09 per diluted share, in 2004 compared with $1,952,000, or $0.12 per diluted share, in 2003. Earnings from continuing operations, net of taxes in 2002 were $20,829,000, or $1.32 per diluted share. Loss from discontinued operations, net of taxes, was $2,505,000, or a loss of $0.16 per diluted share, in 2004 compared with earnings from discontinued operations, net of taxes of $577,000, or $0.04 per diluted share, in 2003. Earnings from discontinued operations, net of taxes in 2002 were $351,000, or $0.02 per diluted share.

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Net Interest Income

Net interest income was $69,441,000 in 2004, compared with $76,900,000 in 2003 and $73,780,000 in 2002. Earning assets averaged $1,955,281,000 in 2004, compared with $2,083,300,000 in 2003 and $1,976,936,000 in 2002. The decrease in 2004 average earning assets (compared to average earning assets in 2003) primarily consists of reductions in business and consumer loans. Additionally, the sale of the non-Indiana construction loan offices in November 2004, which included approximately $134,373,000 in construction loans outstanding, reduced average earning assets approximately $22,000,000 for the year. The acquisition of MetroBanCorp in January 2003 added approximately $126,685,000 in earning assets. Net interest margin is calculated as the percentage of net interest income to average earning assets. Net interest margin was 3.55 percent in 2004, compared to 3.69 percent in 2003 and 3.73 percent in 2002. For the fourth quarter of 2004, net interest margin was at 3.66 percent, compared to 3.69 percent for the third quarter and 3.37 percent for the second quarter of 2004. While the recent rate increases by the Federal Reserve Board are beginning to be reflected in net interest margin, the liquidity created by the sale of the non-Indiana construction loan offices depressed the fourth quarter margin ratio by approximately 10 basis points due to the unusually high level of short-term investments. Yields on consumer and residential mortgage loans fell in 2004, as well as 2003, due to continued prepayments and repricing of higher coupon loans. Historically low interest rates compressed net interest margin and net interest income in 2003 and 2002, as deposit rates were unable to fully absorb reductions in market interest rates over those years. Since First Indiana continues to be positioned to benefit from increasing rates, improvement in net interest margin is likely if market interest rates continue to increase. See “Asset/Liability Management” for a more detailed discussion of the Corporation’s management of interest rate risk.

Net interest margin consists of two components: interest rate spread and the contribution of interest-free funds (primarily non-interest-bearing demand deposits and shareholders’ equity). Interest rate spread is the difference between the yield on total earning assets and the cost of total interest-bearing liabilities. The interest rate spread for 2004 was 3.17 percent, compared with 3.36 percent in 2003 and 3.25 percent in 2002. The contribution of interest-free funds to net interest margin varies depending on the level of interest-free funds and the level of interest rates. Interest-free funds averaged $368,428,000, or 18.8 percent of earning assets, in 2004, $334,547,000, or 16.1 percent of earning assets, in 2003, and $306,678,000, or 15.5 percent of earning assets in 2002. Interest-free funds provided 38 basis points to the margin in 2004, compared with 33 basis points in 2003 and 48 basis points in 2002. Although the contribution from interest-free funds improved in 2004, net interest margin declined due to the decline in interest rate spread. The decline in yields on consumer and residential mortgage loans in 2004 discussed above, as well as declines in the yield on securities available for sale, are the principle reasons for this narrowing of interest rate spread.

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Net Interest Margin

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The following table shows the impact on net interest income of changes in interest rates and volume of the Corporation’s assets and liabilities. The change in interest not due solely to rate or volume has been allocated in proportion to the absolute dollar amounts of the change in each.

Non-Interest Income

The following table shows First Indiana’s non-interest income for the past three years.

Non-interest income totaled $40,435,000 in 2004, compared with $37,663,000 in 2003 and $36,038,000 in 2002. Included in non-interest income for the twelve months ended December 31, 2003, was $1,149,000 resulting from the acquisition of MetroBanCorp in January 2003.

Deposit charges in 2004 increased 2.1 percent to $17,246,000 following a 12.9 percent increase to $16,895,000 in 2003. Growth in deposit charges in 2004 consists of growth in returned check fees and debit card fees partially offset by a decrease in account analysis fees from business demand accounts. Included in deposit

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charges for the twelve months ended December 31, 2003, was $1,075,000 resulting from the acquisition of MetroBanCorp. The remaining growth in deposit charges in 2003 was in overdraft protection fees, account analysis fees from business demand accounts, and debit card fees.

Loan servicing expense was $236,000 in 2004, compared with expense of $2,079,000 in 2003 and income of $413,000 in 2002. Loan servicing income consists of three related elements: fees received from servicing residential mortgage and home equity loans, amortization of capitalized servicing right assets, and changes in the valuation allowance on servicing right assets. In addition, in connection with the sale of the out-of-state construction loans in November 2004, First Indiana is temporarily servicing these loans. Residential and home equity loans serviced for others were $320,994,000 at December 31, 2004, compared with $432,920,000 at December 31, 2003, and $622,980,000 at December 31, 2002. All loans have been sold servicing released since the second quarter of 2004 and the Bank expects to continue this practice. Therefore, loans serviced for others will continue to decrease due to scheduled payments, as well as prepayment activity. Rapid repayments accelerated the amortization of loan servicing rights and increased valuation impairment charges in 2004 and 2003. In addition, fees collected from servicing loans were reduced in 2004 and 2003 due to the lower loan volume. Valuation impairment charges in 2004 totaled $376,000, compared to $2,386,000 in 2003 and $457,000 in 2002. The valuation impairment loss in 2003 reflects high prepayments and adjustments to certain assumptions used in determining the estimated market value of the loan servicing rights portfolio. Additional information relating to loan servicing rights can be found in Note 3 of the Notes to the Consolidated Financial Statements.

Loan fees were $3,039,000 in 2004, compared with $2,610,000 in 2003 and $2,723,000 in 2002. Of the $429,000 loan fee increase in 2004 from 2003, $282,000 consists of additional standby letter of credit fees that were initially deferred under Financial Accounting Standards Board Interpretation No. 45, “Guarantor’s Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of Others,” (“FIN 45”). Upon adoption of FIN 45 in 2003, these deferred fees were accreted into income over the lives of the underlying letters of credit rather than immediately recognized as was formerly done. As a result, letter of credit fee income was lower in 2003 during the transition to this new recognition method. The remaining increase in loan fees in 2004 when compared to 2003 and 2002 reflects modest growth in income-producing activities in business lending partially offset by decreases in single-family construction loan fee income caused by the sale of the non-Indiana construction loan offices in November 2004.

Assets under management by FirstTrust Indiana, the Bank’s investment advisory and trust division, were $961,450,000, $867,700,000, and $658,357,000 at year-end 2004, 2003, and 2002, respectively. Trust fees in 2004 were $3,584,000, compared with $3,028,000 in 2003 and $2,614,000 in 2002. The increase in trust fees and assets under management by FirstTrust for 2004 compared with the same periods of 2003 and 2002, was mainly the result of successful efforts in developing new investment management relationships, as well as large additions to existing relationships.

Investment and insurance product sales commissions generated by First Indiana Investor Services, Inc., the Bank’s investment products and insurance sales subsidiary, ended the year with total fees down slightly compared with the prior year. Fees were $1,704,000 in 2004, compared with $1,717,000 in 2003 and $2,726,000 in 2002. In the fourth quarter of 2004, annuity sales revenues declined due to the elimination of the existing sales channel. A revised format for delivering investment and insurance products is being introduced in 2005. Fees fell in 2003 when compared with fees in 2002, largely due to the lower interest rate environment, which caused the Bank’s insurance carriers to discontinue or offer less attractive products. Commission revenue also fell due to lower commission rates received on new product sales.

Gain on the sale of loans in 2004 was $11,538,000, an increase of $716,000 or 6.6 percent over comparable revenues in 2003 of $10,822,000 and an increase of $3,107,000 or 36.9 percent over comparable revenues in 2002 of $8,431,000. The sale of the non-Indiana construction loan offices resulted in a net gain of $958,000 in 2004 which is included in the total gain reported. Consumer loan sales revenue in 2004 decreased $330,000 from

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revenue in 2003 primarily due to a lower volume of consumer loan sales. Consumer loans sold were $339,595,000 in 2004, compared with $344,638,000 in 2003 and $269,534,000 in 2002. The increase in 2003 gains on sale of loans when compared to gains in 2002 reflected the 27.9 percent increase in consumer loan sales. Sales of variable rate home equity lines of credit (“HELOCs”) grew to $169,251,000 (49.8 percent of consumer loan sales) in 2004 compared with sales of $160,788,000 (46.7 percent of consumer loan sales) in 2003 and sales of $40,158,000 (14.9 percent of consumer loan sales) in 2002. The shift from originations and sales of fixed rate home equity loans to HELOCs reflects the market’s growing preference for this type of product. HELOCs offer an attractive prime-based interest rate, the ability to draw down or pay back principal at any time during the term of the loan, and the option of an interest-only monthly payment. Residential loans sold were $6,481,000 in 2004, compared with $1,439,000 in 2003 and $314,000 in 2002.

Included in net investment securities losses in 2004 were impairment losses of $299,000 related to the Bank’s holdings of Fannie Mae and Freddie Mac preferred stock.

Other non-interest income in 2004 was $3,579,000, compared with $4,663,000 in 2003 and $3,856,000 in 2002. Customer fee revenue included in other non-interest income decreased $458,000 in 2004 from 2003 primarily due to a slow-down in prepayment activity in consumer loans, both owned by the Bank and serviced for others. Broker loan fees decreased $266,000 in 2004 due to a slow-down in refinancing activity. Included in 2003 other non-interest income was a one-time gain of $309,000 on the disposition of a key-man life insurance policy.

Non-Interest Expense

The following table shows First Indiana’s non-interest expense for the past three years.